New stock repurchase excise tax
The Inflation Reduction Act, P.L. 117-169, was signed into law on Aug. 16, 2022. The act included a new Sec. 4501 that imposes an excise tax on certain repurchases of stock by publicly traded corporations.
In general, and before considering exceptions, the amount of the excise tax is equal to 1% of (1) the aggregate fair market value (FMV) of stock repurchased by a corporation, over (2) the aggregate FMV of stock issued by the corporation, in each case, during the tax year. The excise tax applies to repurchases of stock by corporations beginning after Dec. 31, 2022. The excise tax is not deductible for purposes of computing U.S. federal income tax (Sec. 275(a)(6)).
Sec. 4501(f) provides that the IRS will prescribe such Treasury regulations and other guidance as are necessary or appropriate to carry out, and to prevent the avoidance of, the purposes of this section, including regulations and other guidance (1) to prevent the abuse of the exceptions provided by Sec. 4501(e); (2) to address special classes of stock and preferred stock; and (3) for the application of the rules with respect to foreign corporations under Sec. 4501(d).